Reducing Sales Tax Would Deny Needed Money For Improvements

January 23, 1987

It must have been tempting for new Gov. Bob Martinez to win friends and demonstrate his conservative credentials by offering Floridians a tax cut. But it`s irresponsible for him to talk of slicing tax rates in a low-tax state that needs tens of billions of dollars in new revenue to fill unmet governmental needs.

State lawmakers should resist Martinez`s suggestion to link any elimination of sales tax exemptions to a decrease in the sales tax from 5 percent to 4 percent. Instead, they should proceed to sunset the exemptions that deserve to expire without reducing the tax rate.

Florida desperately needs more revenue to finance new roads and mass transit systems, schools, county jails, state prisons and water and sewer systems. These and other facilities not only are needed to cope with explosive population growth, but also with new financial demands trickling down upon state and local governments by a deficit-plagued federal government.

Population growth has just pushed the state into fifth place in the nation; by the end of the century, Florida will be No. 3.

Florida`s sales tax accounts for two-thirds of state government income. Yet, by any standard, it is grossly insufficient as a source of revenue.

Over the next decade alone, the cost just to maintain current inadequate levels of government services is estimated to be $72.4 billion more than the existing tax structure will provide. The cost of unmet needs amount to tens of billions of dollars more.

In the past, ultra-conservative state politicians were so tight with taxes and spending that they neglected to supply adequate levels of services. This has forced present-day politicians to play an expensive, risky game of catch- up and resulted in crisis management in areas such as building roads and prisons.

Rather than cut the sales tax rate, as Martinez suggests, it`s much more likely that within a few years, Florida will have to increase it to get needed revenue.

House Appropriations Chairman Sam Bell, D-Ormond Beach, rightly points out that Florida needs at least $500 million in new revenue next year alone just to fund a continuation budget for existing services, to say nothing of funding unmet needs.

Martinez`s unrealistic estimate is that lawmakers will sunset $2.7 billion worth of sales tax exemptions. That figure is likely to be whittled way down, perhaps to $1 billion or less, as lobbyists for special interests press to protect their exemptions. That revenue gain could be canceled out by the $1 billion a year lost through a one-cent sales tax cut.

Martinez is right about one thing, though. Before Florida lawmakers make any decisions about tax exemptions or the tax rate, they ought to determine how much additional money they can realistically spend each year and determine how that money is to be spent. To enable them to do that, the State Comprehensive Plan Committee is preparing a report calculating the costs of implementing the state plan and recommending specific ways of paying for those costs.

The committee`s chairman, Miami banker Charles Zwick, already has suggested that Florida may need to increase the sales tax by one or two cents, sharing the money between state and local governments, to provide a new, broad-based revenue source.

Broward and Palm Beach are among many counties expected to seek legislative approval for a local option one-cent sales tax this year to fund local programs. Any rollback in the state sales tax, however unwise, should be accompanied by approval for such local option taxes.

Florida`s state and local tax burden and its governmental spending burden is among the lowest in the nation, ranked No. 39 on a per-person basis and No. 47 in relation to personal income.

Florida can no longer afford the dubious luxury of being a tax haven or a tax shelter state. A sales tax, with a quarter of it paid by tourists and other temporary visitors, will be an essential part of an expanding tax system needed to provide the ability to solve pressing problems related to growth and federal funding cutbacks.

Florida`s 5 percent sales tax is one of the lowest in the nation; rolling it back is unnecessary and unwise.